EPR Properties Yield Topping 5%
When it comes to dividend growth-based investing and capital appreciation, it’s a great time to invest in a real estate investment trust (REIT). This is especially true for those that are seriously outpacing the broader market, increasing their annual dividend every year, and providing investors with a broker hurdling dividend reinvest plan (DRIP) and/or direct stock purchase plan (DSPP).
There is no shortage of REITs to consider, including in the areas of health care, hotels/motels, industrial, office, residential, and retail.
EPR Properties (NYSE:EPS) is a retail REIT that makes learning profitable. EPR invests in education, recreation, and education properties. The company’s geographically diverse portfolio provides investors with stable and attractive returns.
EPR’s strong gains come on the heels of strong results in 2015 and the first two quarters of 2016.
About EPR Properties
EPR Properties’ $4.7-billion portfolio is made up of 250 tenants in 270+ locations spread across 39 states and Ontario, Canada. Is also consists of approximately 140 megaplex theaters, eight entertainment retail centers, and eight family entertainment centers. Many of its theaters are leased to AMC Entertainment Holdings Inc (NYSE:AMC). It also owns 11 ski parks, five water parks, 20 golf entertainment complexes, 69 public charter schools, 21 early childhood centers, and three private schools. (Source: “Portfolio Overview,” EPR Properties, last accessed September 22, 2016.)
Entertainment makes up 54% of the REIT’s investment, followed by education (21%), recreation (20%) and other (five percent). The “other” segment consists primarily of a property under development and land held for development related to the Adelaar casino and resort, a $750.0-million project in Sullivan County, New York.
As for its annual dividend, it pays 5.02% ($3.84 per share, $0.32 paid monthly) and has increased its payout for the last six years at an average annual rate of seven percent.
The company’s focused properties have yielded superior results. Over the last decade, the REIT has consistently outperformed the Russell 2000 and MSCI US REIT Index in total returns.
Over the company’s 19-year history, EPR Properties has produced an average annual return of more than 16%. The company currently provides an annual dividend of 5.18%, or $3.84 per share ($0.32 paid monthly). The company has raised its annual dividend for each of the last six years. Since 2010, EPR Properties’ dividend yield has increased at an annual rate of seven percent, from $2.60 in 2010 to $2.84 (projected) in 2016. (Source: “Dividends,” EPR Properties, last accessed September 22, 2016.)
The company has also been rewarding investors in 2016 with spectacular capital appreciation growth. Since the beginning of 2016, EPR Properties’ share price has soared roughly 40%. By comparison, the S&P 500 is up around six percent, the Russell 2000 has advanced 9.7%, and the MSCI US REIT Index is also up 9.7%.
Q2 Revenue Up 11%, Net Income Up 15%
On August 3, EPR Properties announced its financial results for the second quarter ended June 30, 2016. Second-quarter revenue increased 11% year-over-year to $118.0 million. Net income for the period was up 15% at $49.2 million, or $0.77 per share. (Source: “EPR Properties Reports Second Quarter 2016 Results,” EPR Properties, August 3, 2016.)
Funds From Operations (FFO), which is a non-GAAP financial measure used by REITs to define cash flow from operations, climbed 12% to $72.2 million, or $1.13 per share. Adjusted first quarter FFO was up 20% at $74.7 million or $1.17 per share.
EPR ended the second quarter with $8.5 million of unrestricted cash on hand and $347.0 million outstanding under its $650 million unsecured revolving credit facility at June 30, 2016.
“We are pleased to have delivered another very strong quarter, as we continue to benefit from our focused and differentiated investment strategy,” commented company President and CEO Greg Silvers. “The strong momentum we’ve established, along with a very healthy balance sheet, allow us to increase both our investment spending and earnings guidance for the year and support our continued positive outlook.”
For the first six months, revenue increased 18% year-over-year to $236.8 million. Net income soared 22% to $97.4 million, or $1.54 per share. Funds from operations (FFO) advanced 51% to $146.0 million, or $2.30 per share. Adjusted FFO was up 22% at $148.4 million, or $2.33 per share.
Going forward, earnings per share (PR) increased its 2016 guidance for FFO as adjusted per diluted share to a range of $4.72 to $4.82 from a range of $4.70 to $4.80. In addition, the company increased its 2016 investment spending guidance to a range of $650.0 million to $700.0 million from a range of $600.0 million to $650.0 million.
Why Investors Should Watch EPR Properties
EPR Properties is a specialty REIT that invests in properties in unique categories which require a lot of industry knowledge. The company’s geographically diverse portfolio also provides investors with stable and attractive returns that, as previously mentioned, outperform the Russell 2000 and MSCI US REIT Index in total return. Over the last 10 years (Q1 2006 to Q1 2016) EPR’s total return to shareholders has been 214%, compared to 66% from the Russell 2000 and 87% from the MSCI US REIT. (Source: “Corporate Overview,” EPR Properties, last accessed September 22, 2016.)
This is a result of consistently higher revenue and earnings. Between 2012 and 2015, total revenue increased 32.5% to $421.0 million, net income has soared 83% to $170.7 million, and adjusted FFO was up 50% at $260.3 million, or $4.46 per share. The company’s annual dividend yield has climbed 20% from $3.00 (2012) to $3.63 (2015).
EPR Properties’ consistent growth is a result of its strong investment portfolio, which is growing rapidly. Since 2012, total investments are up 112% from $298.1 million to $632 in 2015. In 2016, investment spending is projected to be even higher.